Introduction to Stellar Network and Stellar Lumens XLM. Part 2

Stellar is different from most other cryptocurrencies in that the founders of the network chose to give away 95% of the total distribution of stellar lumens.

There are several reasons for the giveaways. The first one is that the creator of the Stellar network, Jed McCaleb, had a lot of successful projects in the past and has made a lot of money. The second reason why Stellar distributed most of its tokens for free is that during his previous ventures McCaleb has learned that most of the crypto-currency investors are very suspicious about token creation and distribution. Uncertainty about the intentions of creators of the tokens is one of the reasons that prevent cryptocurrencies from gaining a wider adoption.

The Bitcoin network adds bitcoins to circulation by giving them as rewards to the miners who create new blocks of the Bitcoin blockchain. Ripple, a project that McCaleb has been previously working on, created 100 billion coins during the launch of the platform. A large percentage of those coins went to developers and founders, which made many of the investors and followers very suspicious about the motives of the founders. When McCaleb decided to leave Ripple Labs and sell his entire stake that he kept in XRP, the price of the coin went down dramatically.

McCaleb wanted to protect Stellar from having to deal with the same issues, which is why he built the platform very differently.

Out of 95 billion coins that the network gave away, 50% was allocated to individual applicants. Stellar network creators have called this giveaway Direct Signup Program. Another 50% was allocated to charities and non-profits. This became known as the Partnership Program. Finally, the creators of the Stellar network recognized that Bitcoin holders and users have a lot of influence in the cryptocurrency community, which is why the network also launched Bitcoin Program.

Direct Signup Program

The goal of the program was to incentivize all people, including those new to cryptocurrencies, to start using Stellar Lumens. The program was available worldwide and had a simple distribution mechanism with a very low barrier to entry.

Giving away free Lumens was a way for the network to accomplish its goal of building a global cryptocurrency-based digital economy and invite people and organizations learn more about transactions and infrastructure of the Stellar network.

The network conducted the program in several rounds to increase public awareness and encourage learning about the platform. It has also experimented with the ways of conducting coin distribution to give small amounts of Stellar Lumens for free to as many people as possible.

On January 17, 2018, the Stellar Development Foundation has posted an update about the direct sign-up program on its support website (source: https://stellarorg.zendesk.com/hc/en-us/articles/115002208803-Direct-Signup-Program-2017-Update-Receiving-lumen-invites). In the update, the foundation explained that as of 2018, only a very small number of users receive invites for free lumens at any given time. Even if a person downloads a wallet and starts actively using the Stellar network to send and receive payments, there is no guarantee that he or she will receive an invite for free lumens. Emailing of tweeting the foundation will also not result in getting any invites.

The network has also announced that it is considering launching a referral program in the future that will incentivize current users of the platform to invite their friends to become active users of the network.

Partnership program

The goal of the partnership program of the Stellar network was to encourage the use of Stellar Lumens by non-profits and charitable organizations. The partnership program has been similar to the direct signup program in that one of its goals has been to extend the reach of the Stellar network to financially underserved and excluded regions of the world. In addition to allocating funds to share with non-profits, the Stellar Development Foundation allocated 25% of the initial token supply as grants for businesses, governments and other organizations that contribute to the growth of the Stellar ecosystem.

As a part of the program, the Stellar Network accepts proposal from leading institution, considers the proposals and then approves and distributes grants. As of the beginning of 2018, the reward was up to USD$2 million worth of Stellar Lumen tokens per grant.

Grants on the network have two stages. The first one is the allocation and the second one is the actual award of the grant. The allocation consists of the Stellar Development Foundation setting the funds aside for a specific project. All projects need to have milestones and vesting over a number of years. If and when a project meets the agreed milestones, the network releases the funds from the escrow account. This is the award part of grants on the Stellar network.

Stellar Development Foundation has created several partner categories. They are anchors, exchanges, and NGOs. Anchors are organizations that hold deposits, such as banks, money transfer services businesses, and financial technology companies. The foundation wants these organizations to issue credits and work with deposits on the Stellar Network. It distributes grants to these partners based on the value that the partners bring to the network.

Exchanges are platforms that people and organizations use to buy, sell and trade digital currencies and regular currencies. One of the goals of Stellar Development Foundation is to have more exchanges making Stellar Lumens XLM available to their users.

Finally, Stellar Development Foundation invites NGOs of all kinds to submit “out of the box” proposals that can help the Stellar network grow and become more accessible.

Bitcoin program (no longer available)

While the Stellar Development Foundation was trying to introduce as many new users to cryptocurrencies, it has also recognized the fact that most of current influencers in the cryptocurrency space have invested and transacted in Bitcoin, which is why the Stellar Development Foundation allocated 20% of the initial coin distribution to go to the users of Bitcoin and XRP (19% went to the holders of bitcoins and 1% went to the holders of Ripple).

The goal of this program was to introduce bitcoin users to the Stellar network and have them start transacting in Stellar Lumens.

The program had two rounds. The first one finished in October of 2016 and the second one was completed in August of 2017. Stellar Development Foundation has announced that it does plan to have a similar program in the future.

Unclaimed Lumens

Lumens that were unclaimed during the duration of the Bitcoin program went to support the Stellar Build Challenge. The Challenge is a project that gives rewards to developers, educators, and users of the Stellar Network.